Non - Monetary receipts or accruals Flashcards
Name 5 Cases of authority on the topic
CIR v People's Stores (Pty) Ltd Mooi v SIR Lace Proprietary Mines Ltd v CIR Ochberg v CIR CSARS v Brummeria Renaissance (Pty) Ltd
CSARS v Brummeria Renaissance (Pty) Ltd
Summary
Taxpayer was a developer of Retirement villages who granted life rights to occupants in exchange for the provision to the taxpayer of interest free loans.
Outcome
The right to use money interest free was a benefit that accrued to the taxpayer. The granting of life rights was the quid pro quo given in exchange for the receipt of the loans.
Principles
The test for whether a benefit is an ‘amount’ is objective not subjective. Stander’s case was wrongly decided. The primary question is whether the non-monetary benefit has a money value. Whether a receipt or accrual can be turned into money, is merely one of the ways in which this can be established.
SIR v Silverglen Investments (Pty) Ltd
The date at which an amount must be included in gross income is the earlier of receipt or accrual. Neither the taxpayer, nor the Commissioner, has any election in this regard.
CIR v Butcher Brothers (Pty) Ltd
Summary
The taxpayer company took over a 50 year lease when it still had a significant period to run. The taxpayer was entitled to received as its absolute property, the buildings which the lessee was obligated to erect on the leased property. The question was whether this benefit constituted an amount which had accrued to the taxpayer within the year of assessment.
Outcome
There was no accrual in the year of assessment since the amount of the benefit could not be ascertained. The lease still had some 30 years to run and it was not possible to say what value, if any, the building would have 30 years into the future.
Principles
The onus is initially on the commissioner to prove that a non-monetary amount has in fact accrued to a taxpayer. There can only be an accrual if the amount has an ascertainable money value
Geldenhuys v CIR
Summary
The taxpayer was a widow who carried on farming. When her husband passed away, she was entitled, under the joint will made by herself and her late husband, to the income of the estate, while their children were the heirs of the estate. Included in the estate was a flock of sheep. After a severe drought, , a number of sheep died. The flock never again reached its former level. The family later decided to give up farming. The taxpayer sold a flock of sheep for an amount in excess of the amount that the flock had been valued at when that the taxpayer obtained the usufruct.
Outcome
No amount was received by the taxpayer as she was not entitled to the proceeds on the sale of the sheep. She was the usufructuary and since the number of sheep in the flock at the time of sale was lower than the numbers when she inherited the usufruct, there was no surplus to which she was entitled. The proceeds belonged to the holders of the bare dominium, her children.
Principles
For an amount to be received within the definition of gross income, it must be received on the taxpayers own behalf and for their own benefit.
Lategan v CIR
Summary
The taxpayer was a Wine farmer. He sold the wine which he had produced for a sum of money. A portion of the amount was payable within that tax year, whilst the balance was payable in instalments after the tax year.
Outcome
The instalments accrued to the taxpayer and had to be included in his gross income. What had accrued to the taxpayer was a right to claim payment in future and this was a valuable right that the taxpayer could turn into money if he wished tot do so.
Principles
A amount includes not only money, but every form of property earned by the taxpayer, whether corporeal or incorporeal, which has a money value.
CIR v Peoples Stores (Pty) Ltd
Summary
The taxpayer was a retailer who also sold goods to customers on credit whereby the purchase price was payable in 6 equal monthly instalments. On the last day of the year of assessment, there was an amount outstanding under the credit scheme which would only be payable in instalments after the year of assessment.
Outcome
The value of the instalments not yet received had accrued to the taxpayer in the year of assessment and had to be included in the taxpayers gross income.
Principles
An amount accrues to a taxpayer in the year in which he becomes entitled to the amount.
Lace Proprietary Mines Ltd v CIR
Summary
The taxpayer company sold certain mineral rights. The contract of sale stated the purchase price as being 250 000 pounds to be paid by an allotment to the taxpayer of 1000 000 shares with a nominal value of 5 shillings each in the purchasing company. The question in issue was: was the amount received by the taxpayer, cash or shares?
Outcome
The intention of the parties was to sell the mineral rights for shares. The shares had to be valued and their value was a question of fact.
Principles
When a contract provides for a non monetary consideration, that consideration must be valued and its value is a question of fact. The true intention of the parties must be determined.
Ochberg v CIR
Summary
The taxpayer was the controlling shareholder in a company and for all intents and purposes, was it’s sole beneficial shareholder. In consideration for services rendered and as compensation for the use of certain premises, the taxpayer was awarded the remaining shares in the company.
Outcome
The amount that accrued to the taxpayer, was the market value of the shares.
Principles
An amount that accrues to a taxpayer must be valued objectively. The subjective value to the taxpayer is irrelevant.
